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State Ballot Initiative Results: Tax Cuts for Some, Tax Hikes for Others, and Marijuana Taxes For All
In addition to that other election you might have followed last week, Americans voted on a whole bunch of state tax measures. And while some ballots still are being counted, we know enough to know the results were mixed. For example: Arizona got a tax hike, Illinois did not, and Colorado got both a tax cut and a major new tax.
That is, unless we’re talking about marijuana taxes, because whether red, blue, or purple, if a state had legalizing (and taxing) marijuana on the ballot in 2020, its voters approved it. Even without all precincts reporting, Decision Desk TPC is willing to project an increasingly green map.
So what does all of it mean for state tax policy?
Voters, like taxes, are sometimes complicated
The vote with the most potential to change a state’s finances was Illinois’s Allow for Graduated Income Tax Amendment. It was complicated but the amendment would have ultimately created multiple income tax rates and generated billions of dollars in new (and needed) revenue for Illinois. However, the amendment lost badly in a state President-elect Joe Biden carried easily.
All these results might lead you to conclude voters are in no mood for tax hikes right now. Don’t do that. First, the politics in Alaska, California, and Illinois on these specific tax issues are particularly fraught.
Second, voters in freshly-minted-swing-state Arizona approved an income tax hike on high-earners to support education, and voters in ruby-red Arkansas supported a higher sales tax rate to fund transportation.
And, if you really want complexity, check out Colorado, where voters:
- Approved Proposition 116, which cut the state’s income tax rate;
- Approved Amendment B, which is complicated but ultimately stops a potential residential property tax cut; and
- Approved Proposition 118, which creates a new payroll tax to fund an expansive paid family leave program.
And to really drive the point home, each vote passed with the same level of support: 58 percent. Are Colorado voters pro- or anti-tax?
Point is, each of these votes tells you a lot about the specific state, but it’s impossible to discern a national trend when it comes to these major state and local taxes. For that, you’d have to somehow find overwhelming and consistent support for the same issue across multiple states.
Americans are finally united … on marijuana taxes
Voters in four politically diverse states were asked about legalizing marijuana.
And in no state was the vote particularly close. The lowest level of support for marijuana legalization was 54 percent in South Dakota.
This is the result of two significant trends. First, two-thirds of Americans support marijuana legalization. Second, the revenue from marijuana taxes is relatively small but still helpful to state and local budgets. In states where the recreational drug is available for legal and taxable purchase, marijuana taxes provide roughly 1 percent of state and local tax revenue. That might not sound like much, but that amounts to tens if not hundreds of millions of dollars in new revenue.
Going forward, remember that legalization in one state often begets legalization in others because policymakers hate seeing residents take their tax dollars to neighboring states. After this vote, it probably won’t take long for states such as New Mexico, New York, and Pennsylvania to join the list of states with legal and taxable marijuana.
Voters also embraced other types of sin (taxes)
Another reason these initiatives passed is the revenue was dedicated to extremely popular programs: Colorado’s went for education and Oregon’s went to health care. The dedication of funds also probably helped the Arizona and Arkansas ballot measures pass—and the lack of dedicated funds possibly hurt the Illinois amendment.
Gambling initiatives also hit the jackpot in several states. Louisiana, Maryland, and South Dakota all approved sports betting, while Nebraska approved casino gambling at racetracks. There are legitimate arguments against government-approved gambling, but it’s increasingly hard to resist an idea that’s become so widespread in this country.
How will state legislatures respond?
If your state has not yet legalized marijuana and set up a taxing regime, it probably will soon.
If your state has not recently increased taxes on tobacco or expanded legal gambling, it will at least consider it.
That means voters and their elected leaders still must confront changes to income, sales, and property taxes—the ones that so divided voters on Election Day.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
Richard Vogel/AP Photo